Time to curb rising CEO pay

April 21, 1999|By Ellen Goodman

BOSTON -- It's not that I envy the corporate titans. It's just that I have a small failure of imagination.

Every time I try to envision myself as Disney CEO Michael Eisner, I get stuck at the same place. There I am in front of the mirror saying to myself, "Let's see, I earned $575 million last year. Yeah, that seems about right. I'm worth that."

I'm pleased that he doesn't suffer from low self-esteem, but how does he get his mind around those numbers? For that matter, go figure the worth of Sanford I. Weill, the head of Citigroup that runs those nifty ads on the Golf Channel saying, "How Money Works Now." This is how money works now for Weill: He got paid $166 million last year.

Then of course, there's GE's John F. Welch Jr. His executive compensation -- the word compensation sounds as if he's been working in the coal mines -- rang in at $83 million.

How do they measure their value? Ho hum, another day, another quarter-million dollars?

Big bucks

What brings on this particular rant are the annual Wall Street Journal and Business Week reports on executive pay. We are again invited to gawk at the most garish chief executive officer blossoms on the nation's money tree.

There was a time when J.P. Morgan was considered an icon of pure capitalist greed. But Morgan had a rule that the operating CEOs of his companies couldn't earn more than 20 times what the hired hands earned. By 1980, the average CEO was earning 42 times what the average worker was earning.

Guess what it is now? Last year, the CEOs at major companies earned 419 times the pay of the average blue-collar worker. And to make it more obvious, the CEO pay at 350 companies ballooned 36 percent last year. Workers got a 2.7 percent raise.

Exclusive club

Of course, these men -- and they are almost exclusively white men -- don't get this in a weekly paycheck. Most of it comes in stock options. Nor do they compare their worth -- mirror, mirror, on the wall -- to the average worker. They compare their compensation to the other boys in the CEO club.

But now there is just the itsy-bitsiest notion that maybe, in the words of the Wall Street Journal headline, "Enough is Enough." Maybe CEOs shouldn't be getting megabucks if workers are getting pink slips. Maybe the value of the company isn't entirely due to the guy on top.

It isn't just journalists with mirrors and weak imaginations who are suggesting this. Shareholders in a group called Responsible Wealth are trying a new tactic. These members -- including the great-great-granddaughter of a Standard Oil founder and the great-grandson of Oscar Mayer -- have filed resolutions to get corporations to agree that there should be some defined ratio between CEO and worker pay.

They haven't set a number. They aren't saying that we should go back to J.P. Morgan. But as Scott Klinger, the director of the Responsible Wealth program at United for a Fair Economy, says: "We want to get a discussion going on whether the value of a company has been created by a single person or all employees. We want shareholders to discuss whether it makes sense to focus the cost cutting knife on the floor while executive pay goes up."

In looking over proxy statements, it became apparent that the only criteria for CEO pay was other CEO pay. As Mr. Klinger says, "Each statement said they were paying above average." It was like Lake Wobegon where all the children were above average. This thinking kept pushing up CEO pay.

But next week, a vote will come up for some cap on the CEO-worker ratio at the annual meeting of Citigroup. That's where Sanford Weill "earned" his $166 million while his company began laying off some 10,000 workers.

A day later, it will be General Electric. GE's $83 million John Welch was on Business Week's list of CEOs who gave shareholders the least for their money. There will be eight companies facing votes this spring.

There are others taking on the issue of CEO pay. Unions, whose pension funds make them heavy investors, are also going for a new look in the financial mirror.

Right now, the May issue of Money magazine has a cover line boasting, "Everyone's Getting Rich!" But everyone isn't getting rich. In the growing gap, the top 1 percent of households now have more wealth than the bottom 95 percent.

The folks at Responsible Wealth are saying that shareholders are also stakeholders in society. The cap they are trying on for size is a thinking cap.